Volume 20, Issue 3 (9-2025)
J. Mon. Ec. 2025, 20(3): 415-433 |
Back to browse issues page
Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
Mirjalili S H. The Rise and Fall of LIBOR and Its Alternatives. J. Mon. Ec. 2025; 20 (3) :415-433
URL: http://jme.mbri.ac.ir/article-1-698-en.html
URL: http://jme.mbri.ac.ir/article-1-698-en.html
Institute for Humanities and Cultural Studies
Abstract: (203 Views)
For forty years, LIBOR was the dominant benchmark interest rate for various financial products, playing a central role in global financial markets. LIBOR was available in 10 currencies and 15 maturities, fulfilling two primary roles: acting as a reference rate for financial contracts and serving as a benchmark for evaluating financing costs. However, these rates were not based on actual transaction data but were instead calculated from surveys of participating panel banks. Thomson Reuters computed the rates using a trimmed mean. The LIBOR scandal involved three forms of manipulation by panel banks: under-reporting, over-reporting, and maintaining artificial stability in rates. The Wheatley Review recommended reforming LIBOR instead of replacing it. In March 2021, the UK FCA officially confirmed the gradual elimination of all LIBOR settings. By June 30, 2023, the remaining US dollar LIBOR settings were discontinued. Fines related to the LIBOR scandal surpassed $10 billion. In July 2021, the World Bank announced the transition from LIBOR to new reference rates for both new and existing loans. The main alternatives to LIBOR include SOFR, SONIA, €STR, SARON, TONAR, and AONIA. This paper explores the debate between using a single or multiple reference rates, considering the benefits of a multi-reference system to mitigate systemic risk.
Type of Study: Original Research - Case Study |
Subject:
Monetary Economics
Received: 15 May 2025 | Accepted: 5 Aug 2025 | Published: 2 Nov 2025
Received: 15 May 2025 | Accepted: 5 Aug 2025 | Published: 2 Nov 2025
References
1. رفرنس های متنی مثل خروجی کراس رف را در اینجا وارد کرده و تایید کنید
Alternative Reference Rates Committee, (2021). An Updated User's Guide to SOFR, Federal Reserve Bank of New York. htttps://www.newyorkfed.org
2. Central Bank of Iran. (2022, July 31). Currency regulations no. 01/117132: Section four: Foreign currency facilities and guarantees.
3. Corporate Finance Institute. (2026). Global alternative reference rates explained. Corporate Finance Institute.
4. Duffie, D., & Stein, J. C. (2015). Reforming LIBOR and other financial market benchmarks. Journal of economic perspectives, 29(2), 191-212. [DOI:10.1257/jep.29.2.191]
5. Eichengreen, B. (2022). Somnolence to dominance: a hundred years of the foreign exchange market in London. The Journal of European Economic History (JEEH), 51(1), 75-111.
6. European Central Bank, (2024), What are benchmark rates? September. https://www.ecb.europa.eu/ecb-and-you/explainers.
7. Financial Conduct Authority, (2012), The Wheatley Review of LIBOR: final report, September. https://assets.publishing.service.gov.uk/media/5a7b3fe2e5274a319e77e076/wheatley_review_libor_finalreport_280912.pdf
8. Financial Stability Board. (2022, April 5). FSB statement welcoming smooth transition away from LIBOR. Financial Stability Board.
9. Gellert, K., & Schlögl, E. (2021). Short rate dynamics: A fed funds and sofr perspective. arXiv preprint arXiv:2101.04308. [DOI:10.2139/ssrn.3763589]
10. Hou, D., & Skeie, D. R. (2014). LIBOR: Origins, economics, crisis, scandal, and reform. FRB of New York Staff Report, (667). [DOI:10.2139/ssrn.2423387]
11. Huan, X., Previts, G. J., & Parbonetti, A. (2023). Understanding the LIBOR scandal: the historical, the ethical, and the technological. Journal of Banking Regulation, 24(4), 403-419. [DOI:10.1057/s41261-022-00205-4]
12. ICE Benchmark Administration. (n.d.). LIBOR. https://www.theice.com/iba/libor
13. Kiff, J. (2012). What is Libor? The London Interbank Rate is used widely as a benchmark but has come under fire. Finance and Development, 49(4), 32-3.
14. Kirti, D. (2022). What are reference rates for? Journal of Banking and Finance,144, 106635. [DOI:10.1016/j.jbankfin.2022.106635]
15. Mollenkamp, C., & Whitehouse, M. (2008). Study casts doubt on key rate. Wall Street Journal, 29(5).
16. Monticini, A., & Thornton, D. L. (2013). The effect of underreporting on LIBOR rates. Journal of Macroeconomics, 37, 345-348. [DOI:10.1016/j.jmacro.2013.02.002]
17. Tuckman, B. (2023). Short-term rate benchmarks: The post-LIBOR regime. Annual Review of Financial Economics, 15(1), 473-491. [DOI:10.1146/annurev-financial-110921-015054]
18. World Bank. (2021, July 22). World Bank approves new reference rates for existing and new loans in preparation for end of LIBOR. https://www.worldbank.org/en/news/press-release/2021/07/22/world-bank-approves-new-reference-rates-for-existing-and-new-loans-in-preparation-for-end-of-libor
| Rights and permissions | |
 |
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. |
